ANNUAL EPT 2021

ANNUAL REPORT

2021For the fiscal year ended March 31, 2021

1ANNUAL REPORT 2021

1 Contribute to society with pride and confidence.

2 Be customer-oriented, with zeal and sincerity.

3 Challenge courageously for higher goals without fear of failure.

4 Trust and respect each other for a brighter working atmosphere.

5 Keep an open mind, and view SMK from a global perspective.

CONTENTS

SMK is committed to the advancement of mankind through development of the information society, by integrating its current technological strengths and creating advanced technology.

Millions of yen Percent Change2020/2021

Thousands ofU.S. dollars

Years ended and as of March 31 2020 2021 2021

Operating Results

Net sales ¥ 54,161 ¥ 48,560 (10.3)% $ 438,623

Operating income (loss) (244) 1,070 ー 9,665

Profit (loss) attributable to owners of parent (2,651) 1,917 ー 17,316

Financial Position

Total assets ¥ 50,204 ¥ 50,332 0.3% $ 454,629

Total net assets 24,629 27,751 12.7 250,664

Yen Percent Change2020/2021 U.S. dollars

Years ended and as of March 31 2020 2021 2021

Per Share Data

Profit (loss) attributable to owners of parent

Basic ¥(410.88) ¥ 297.92 ー% $2.69

Diluted ーーーー

Cash dividends 40.00 50.00 25.0 0.45Note 1. The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥110.71 = U.S. $1.00. 2. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018. Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share was

carried out at the beginning of the year ended March 31, 2017. 3. The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting”

(ASBJ Statement No. 28, February 16, 2018) (hereinafter, the “Partial Amendments”) from the beginning of the fiscal year ended March 31, 2019. As such, financial position for the year ended March 31, 2018 is calculated on the assumption that“Partial Amendments” is applied retrospectively.

4. In the calculation of profit (loss) per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of the average number of shares in the period.

Net salesBasic profit (loss) attributable to

owners of parent per shareOperating income (loss) Total assets / Total net assetsProfit (loss) attributable to

owners of parent Cash dividends per share

Yasumitsu IkedaPresident and CEO/COO

We are obliged to you for your continued support and good patronage.

On this occasion, we would like to express our deepest sympathy to everyone who has been affected by COVID-19.

We would like to report on the outline and results of the SMK Group’s business for the 99th fiscal year (from April 1, 2020 to March 31, 2021).

We look forward to your continuing support and encouragement.

June 2021

Millions of yen

25,000

50,000

75,000

2017 20180

62,97159,786

2020 20212019

57,38654,161

48,560

Millions of yen

0

1,500

3,000

(1,500)

(3,000)

630 485

2017 2018

(1,834)

20202019

(244)

1,070

2021

Millions of yen

1,500

3,000

(3,000)

(1,500)

0

1,017

(288)

2017 2018 2020

(834)

2019(2,651)

1,917

2021

Millions of yen

20,000

40,000

60,000

80,000

0

Total assets Total net assets

2019 2020

27,75127,751

2021

50,332

62,318 61,474

31,318 30,637

2017 2018

28,612

58,713

24,629

50,204

yen

(200)

0

400

300

200

100

(500)

(100)

(300)

(400)

297.92

2021

(126.47)

2019

(410.88)

2020

151.65

2017 2018

(43.63)

yen

0

20

40

60

50.00

2021

10.008.00

2017 2018

50.00

2019

40.00

2020

Financial Highlights

To Our Shareholders and InvestorsTo Our Shareholders and Investors

Financial Highlights

2 Overview of Consolidated Results by Division

4 Financial Section

5 Financial Review

6 Consolidated Balance Sheet

8 Consolidated Statement of Income

8 Consolidated Statement of Comprehensive Income

9 Consolidated Statement of Changes in Net Assets

10 Consolidated Statement of Cash Flows

11 Notes to Consolidated Financial Statements

27 Report of Independent Auditors

29 Officer Introduction

Corporate Information

SMK Philosophy

SMK Action Guidelines

32 ANNUAL REPORT 2021 ANNUAL REPORT 2021

The many different electronic components that SMK produces are widely used by electronics manufacturers in and outside Japan. The markets for these components can be broadly classified into four markets: ICT Market, Home Appliance Market, Car Electronics Market and Industry Market.

Two divisions, namely CS (Connection System) Division and SCI (Sensing, Communications and Interface) Division, as well as Research & Development Center, are responsible for developing products that continually meet market requirements in the wide range of markets outlined above. The two divisions handle operations ranging from product planning and design to mass production, whereas Research & Development Center is primarily in charge of designing and developing products in new fields.

In this section, we present an overview of our results achieved in each of the two divisions and Research & Development Center in the fiscal year under review.

Overview of Consolidated Results by Division(April 1, 2020 to March 31, 2021)

Others: markets of medical equipment, rehabilitation equipment, etc.

Others: businesses of other electronic parts, lease, real-estate rental, and worker dispatching undertakings.

In the ICT market, sales of connectors increased year on year due to increased demand from customers in the U.S. for use in tablet devices as a result of the expansion of remote work and online classes, as well as strong sales of connectors for smartphones made to customers in China. In the home appliance market, sales of new connectors for game consoles and TVs grew steadily and exceeded those of the previous year. In the car electronics market, sales remained sluggish until the second quarter, largely affected by the slump of automotive sales due to the spread of the COVID-19 pandemic, but orders recovered in the third quarter, mainly in China and the U.S., and remained at the same level as that of the previous fiscal year.

As a result, net sales of CS Division amounted to ¥19,840 million (6.3% increase year on year), and operating income was ¥1,444 million (924.3% increase year on year).

Major ProductsConnectors (Coaxial, FPC)Jacks

In the home appliance market, sales of remote control units for sanitary and home equipment increased year on year, but sales of remote control units for air conditioners decreased in the first quarter due to the impact of temporary shutdowns and lower capacity utilization rates at factories in Southeast Asia, and sales of remote control units for set-top boxes decreased in the fourth quarter. As a result, sales in the home appliance market as a whole decreased from the previous year. In the car electronics market, although orders for camera modules, units and touch sensors began to recover in the third quarter, the cumulative total for the period under review fell below that of the previous year due to the global slump in automotive sales. In the ICT market, sales of switches for smartphones made to customers in the U.S. decreased and fell below those of the previous year.

As a result, net sales of SCI Division amounted to ¥28,431 million (19.1% decrease year on year), and operating loss was ¥72 million (compared to operating income of ¥10 million in the previous fiscal year).

SCI (Sensing,Communications andInterface) DivisionMajor Products

Remote Control UnitsSwitchesCamera ModulesTouch Sensors

Sales of Bluetooth® modules, which are the central product among wireless communication modules, the mainstay business of the Research & Development Center, fell below those of the previous year due to a decrease in sales for mobile printers, despite an increase in sales for payment terminals.

As a result, net sales of Research & Development Center amounted to ¥252 million (10.0% decrease year on year), and operating loss was ¥277 million (compared to an operating loss of ¥279 million in the previous fiscal year).

Research & Development CenterMajor Products

Wireless Modules

Sales by Market

CSDivision

¥ 19,840 Million

Others¥ 36 Million

0.1%

40.9%

58.5%SCI Division¥ 28,431 Million

Research & Development Center¥ 252 Million0.5%

Net sales¥ 48,560

Million

Sales by Division

ICT¥ 10,635 Million

CarElectronics¥ 14,819 Million

Industry / Others¥ 3,906 Million

HomeAppliance

¥ 19,199 Million

30.6%39.5%

21.9%8.0%

Net sales¥ 48,560

Million

CS(Connection System)Division

Net sales / Operating loss Millions of yen

0

500

0

(500)

500

281

(279)

2020

252

(277)

2021

Net sales / Operating income (loss) Millions of yen

0

20,000

40,000

(2,000)

0

2,000

4,00035,137

10

2020

28,431

2021

(72)

Net sales / Operating income Millions of yen

0

10,000

5,000

15,000

25,000

20,000

0

800

400

1,200

1,600

2,000

19,840

1,444

2021

18,670

141

2020


Millions of yen Thousands of U.S. dollars

Years ended and as of March 31 2017 2018 2019 2020 2021 2021

Operating Results

Net sales ¥ 62,971 ¥ 59,786 ¥ 57,386 ¥ 54,161 ¥ 48,560 $ 438,623

Operating income (loss) 630 485 (1,834) (244) 1,070 9,665

Profit (loss) attributable to owners of parent 1,017 (288) (834) (2,651) 1,917 17,316

Financial Position

Total assets ¥ 62,318 ¥ 61,474 ¥ 58,713 ¥ 50,204 ¥ 50,332 $ 454,629

Total net assets 31,318 30,637 28,612 24,629 27,751 250,664

Yen U.S. dollars

Per Share Data

Total net assets ¥ 4,734.95 ¥ 4,635.03 ¥ 4,415.09 ¥ 3,870.65 ¥ 4,311.91 $ 38.95

Profit (loss) attributable to owners of parent

Basic 151.65 (43.63) (126.47) (410.88) 297.92 2.69

Diluted 151.62 －－－－－

Cash dividends 10.00 8.00 50.00 40.00 50.00 0.45

Note 1. The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥110.71 = U.S. $1.00. 2. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018. Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share was

carried out at the beginning of the years ended March 31, 2017. 3. The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting”

(ASBJ Statement No. 28, February 16, 2018) (hereinafter, the “Partial Amendments”) from the beginning of the fiscal year ended March 31, 2019. As such, financial position for the years ended March 31, 2018 is calculated on the assumption that“Partial Amendments” is applied retrospectively.

4. In the calculation of profit (loss) per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of the average number of shares in the period.

Five-Year SummarySMK Corporation and Consolidated Subsidiaries

SMK’s net sales for the fiscal year ended March 31, 2021 decreased 10.3% year on year to ¥48,560 million (US$438,623 thousand), and operating income of ¥1,070 million (US$9,665 thousand) and profit attributable to owners of parent of ¥1,917 million (US$17,316 thousand) were recorded.

In the ICT market, although sales expanded due to increased customer demand as a result of the expansion of remote work and online classes, sales in the home appliance, car electronics, industry and other markets decreased due to restrictions on operations at factories in Southeast Asia amid the spread of COVID-19 in the first quarter and the global slump in automotive sales.

As a result, net sales were ¥48,560 million (US$438,623 thousand), down 10.3% year on year.

Net Sales

As the cost of sales ratio improved year on year due to our efforts such as proactive launch of new products and initiatives taken to reduce costs, operating income amounted to ¥1,070 million (US$9,665 thousand).

Operating Income

Profit attributable to owners of parent was ¥1,917 million (US$17,316 thousand) as a result of recording rent income/expense, foreign exchange gains, subsidies for employment adjustment, etc. in other income/expenses.

Profit attributable to owners of parent

As of March 31, 2021, total assets were ¥50,332 million (US$454,629 thousand), with ROA of 5.2%.

Total Assets / ROA

As of March 31, 2021, total net assets were ¥27,751 million (US$250,664 thousand), with ROE of 7.3 %.

Total Net Assets / ROE

Total net assets(As of March 31)

Return on equity (ROE)(Years ended March 31)

Return on assets (ROA)(Years ended March 31)

Millions of yen

0

26,000

28,000

30,000

32,000

2017 2018

30,63731,318

2019

28,612

2020

24,629

2021

27,751

(12)

%

0

4

(4)

(8)

8

2017 2018

3.2

(0.9)

2019

(2.8)

2020

(9.9)

2021

7.3

(2)

%

2

0

4

6

2020

(0.3)

2021

5.2

2017 2018

0.6

2.2

2019

(1.2)

Financial Section Financial Review

Cash FlowsNet cash provided by operating activities amounted to ¥4,653 million (US$42,029 thousand), net cash used in investing activities totaled ¥2,325 million (US$21,001 thousand), and net cash used in financing activities was ¥3,904 million (US$35,263 thousand).


Millions of YenThousands ofU.S. dollars

(Note 2)

Assets 2020 2021 2021

Current assets

Cash and cash equivalents (Note 15) ¥ 10,437 ¥ 8,742 $ 78,963

Time deposits (Note 15) 77 57 515

Notes and accounts receivable, trade (Note 15) 10,899 11,242 101,545

Electronically recorded monetary claims (Note 15) 1,432 1,325 11,968

Inventories (Note 3) 6,426 6,547 59,136

Other current assets (Note 17 and 20) 1,162 1,050 9,484

Allowance for doubtful accounts (104) (61) (551)

30,332 28,903 261,069

Investments and long-term loans

Investment securities (Note 15 and 16) 2,493 3,113 28,119

Long-term loans receivable (Note 20) 50 90 813

Asset for retirement benefits (Note 6) 1,114 2,058 18,589

Other investments (Note 20) 641 661 5,971

Allowance for doubtful accounts (39) (84) (759)

4,259 5,839 52,741

Property, plant and equipment （Note 5, 11 and 18)

Land (Note 4) 5,977 5,939 53,645

Buildings 19,032 19,386 175,106

Machinery and vehicles 22,762 23,108 208,725

Tooling and office furniture 19,082 19,489 176,036

Leased assets 30 32 289

Right of use assets 127 135 1,219

Construction in progress 221 128 1,156

67,234 68,220 616,204

Less-accumulated depreciation (51,842) (52,816) (477,066)

15,392 15,403 139,129

Other assets

Deferred tax assets (Note 12) 100 92 831

Intangible assets (Note 11) 120 93 840

220 185 1,671

Total assets ¥ 50,204 ¥ 50,332 $ 454,629


(Note 2)

Liabilities and net assets 2020 2021 2021

Current liabilitiesShort-term loans payable (Note 5 and 15) ¥ 9,639 ¥ 6,122 $ 55,298 Notes and accounts payable, trade (Note 15) 5,101 5,029 45,425 Accrued income taxes 283 330 2,981 Accrued bonuses 576 716 6,467 Accrued directors' and officers' bonuses 0 28 253 Accounts payable, non-trade (Note 15) 1,468 1,775 16,033 Other current liabilities (Note 17) 1,529 1,495 13,504

18,598 15,498 139,987

Long-term liabilitiesLong-term debt (Note 5 and 15) 5,513 5,180 46,789 Deferred tax liabilities (Note 12) 491 954 8,617 Accrued directors' and officers' retirement benefits 134 147 1,328 Liability for retirement benefits (Note 6) 62 61 551 Accrued directors' and officers' share awards — 14 126 Other long-term liabilities 774 723 6,531

6,976 7,082 63,969

Net assetsShareholders’ equity (Note 7)Common stock

Authorized : 19,596,127 sharesIssued : 7,500,000 shares 7,996 7,996 72,225

Capital surplus 12,057 12,057 108,906 Retained earnings 11,582 13,241 119,601 Treasury stock (4,391) (4,394) (39,689)

27,245 28,900 261,042 Accumulated other comprehensive incomeNet unrealized gains (losses) on other securities 106 288 2,601Net unrealized gains (losses) from hedging instruments (18) (7) (63) Foreign currency translation adjustments (2,295) (1,997) (18,038) Retirement benefits asset and liability adjustments (122) 568 5,131

(2,329) (1,149) (10,378) Non-controlling interests (286) — —

24,629 27,751 250,664

Total liabilities and net assets ¥ 50,204 ¥ 50,332 $ 454,629

SMK Corporation and Consolidated SubsidiariesAs of March 31, 2020 and 2021

Consolidated Balance Sheet Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.



(Note 2)

2020 2021 2021Net sales (Note 19) ¥ 54,161 ¥ 48,560 $ 438,623 Cost of sales (Note 3 and 8) 46,437 40,119 362,379 Selling, general and administrative expenses (Note 8 and 9) 7,968 7,370 66,570 Operating Profit (loss) (Note 19) (244) 1,070 9,665

Other incomeInterest and dividend income (Note 20) 105 71 641 Rent income 1,050 1,066 9,629 Foreign exchange gains — 160 1,445 Subsidies for employment adjustment — 542 4,896 Gain on sales of fixed assets (Note 10) 90 21 190 Gain on sales of golf memberships 23 — — Other 407 525 4,742

Total other income 1,676 2,387 21,561

Other expensesInterest expense 109 108 976 Rent expense (Note 20) 559 567 5,121 Foreign exchange losses 692 — — Compensation expenses — 87 786 Loss on sales of fixed assets (Note 10) 36 0 0 Loss on disposal of fixed assets (Note 10) 72 79 714 Loss on impairment of fixed assets (Note 11) 2,953 130 1,174 Loss on valuation of investment securities 23 112 1,012 Loss on liquidation of subsidiaries and affiliates — 22 199 Other 148 76 686

Total other expenses 4,596 1,186 10,713 　　

Profit (loss) before income taxes (3,165) 2,271 20,513 Income taxes (Note 12)

Current 228 297 2,683 Refund (292) — — Deferred (163) 93 840

Profit (loss) (2,937) 1,881 16,990 Loss attributable to non-controlling interests (286) (35) (316) Profit (loss) attributable to owners of parent ¥ (2,651) ¥ 1,917 $ 17,316

Yen U.S. dollars(Note 2)

Per share data (Note 14)Total net assets ¥ 3,870.65 ¥ 4,311.91 $ 38.95 Profit (loss) attributable to owners of parent

Basic (410.88) 297.92 2.69 Diluted — — —

Cash dividends 40.00 50.00 0.45 See accompanying notes to consolidated financial statements.


(Note 2)

2020 2021 2021Profit (loss) ¥ (2,937) ¥ 1,881 $ 16,990 Other comprehensive income (Note 13)

Net unrealized gains (losses) on other securities (191) 181 1,635 Net unrealized gains (losses) from hedging instruments (10) 10 90 Foreign currency translation adjustments (268) 297 2,683 Retirement benefits asset and liability adjustments (132) 690 6,232 Total other comprehensive income (603) 1,180 10,658

Comprehensive income ¥ (3,541) ¥ 3,061 $ 27,649 Total comprehensive income attributable to:

Owners of parent ¥ (3,254) ¥ 3,097 $ 27,974 Non-controlling interests ¥ (286) ¥ (35) $ (316)

See accompanying notes to consolidated financial statements.

SMK Corporation and Consolidated SubsidiariesYears ended March 31, 2020 and 2021

Consolidated Statement of IncomeSMK Corporation and Consolidated SubsidiariesYears ended March 31, 2020 and 2021

Consolidated Statement of Changes in Net Assets


Consolidated Statement of Comprehensive Income

Millions of yen

Shareholders’ equity Accumulated other comprehensive income

Non-controlling

interestsTotal net

assets

Number of shares of common

stockCommon

stockCapital

surplusRetained earnings

Treasury stock

Total shareholders'

equity

Net unrealized gains (losses)

on other securities

Net unrealized gains (losses) from hedging

instruments

Foreign currency

translation adjustments

Retirement benefits asset

and liability adjustments

Total accumulated

other comprehensive

income

Balance at April 1, 2019 7,500,000 ¥ 7,996 ¥ 12,057 ¥ 14,597 ¥ (4,313) ¥ 30,338 ¥ 297 ¥ (7) ¥ (2,027) ¥ 10 ¥ (1,726) ¥ — ¥ 28,612 Cash dividends paid (326) (326) — (326)Loss attributable to owners of parent (2,651) (2,651) — (2,651)Acquisition of treasury stock (128) (128) — (128)Disposition of treasury stock (37) 49 12 — 12 Transfer to Capital surplus from retained earnings 37 (37) — — — Net changes in items other than shareholders' equity — (191) (10) (268) (132) (603) (286) (889)Total changes — — — (3,014) (78) (3,093) (191) (10) (268) (132) (603) (286) (3,982)

Balance at March 31, 2020 7,500,000 7,996 12,057 11,582 (4,391) 27,245 106 (18) (2,295) (122) (2,329) (286) 24,629 Balance at April 1, 2020 7,500,000 7,996 12,057 11,582 (4,391) 27,245 106 (18) (2,295) (122) (2,329) (286) 24,629

Cash dividends paid (259) (259) (259)Profit attributable to owners of parent 1,917 1,917 1,917 Acquisition of treasury stock (3) (3) (3)Disposition of treasury stock — — Transfer to Capital surplus from retained earnings — — Net changes in items other than shareholders' equity — 181 10 297 690 1,180 286 1,466 Total changes — — — 1,658 (3) 1,655 181 10 297 690 1,180 286 3,122

Balance at March 31, 2021 7,500,000 ¥ 7,996 ¥ 12,057 ¥ 13,241 ¥ (4,394) ¥ 28,900 ¥ 288 ¥ (7) ¥ (1,997) ¥ 568 ¥ (1,149) ¥ — ¥27,751

Thousands of U.S. dollars (Note 2)

Shareholders’ equity Accumulated other comprehensive income

Non-controlling

interestsTotal net

assetsCommon

stockCapital surplus

Retained earnings

Treasury stock

Total shareholders'

equity

Net unrealized gains (losses)

on other securities

Net unrealized gains (losses) from hedging

instruments

Foreign currency

translation adjustments

Retirement benefits asset

and liability adjustments

Total accumulated

other comprehensive

income

Balance at April 1, 2020 $ 72,225 $108,906 $104,616 $ (39,662) $246,093 $ 957 $ (163) $ (20,730) $ (1,102) $ (21,037) $ (2,583) $222,464 Cash dividends paid (2,339) (2,339) — (2,339)Profit attributable to owners of parent 17,316 17,316 — 17,316

Acquisition of treasury stock (27) (27) — (27)Disposition of treasury stock — — — Transfer to Capital surplus from retained earnings — — —

Net changes in items other than shareholders' equity — 1,635 90 2,683 6,232 10,658 2,583 13,242

Total changes — — 14,976 (27) 14,949 1,635 90 2,683 6,232 10,658 2,583 28,200 Balance at March 31, 2021 $ 72,225 $108,906 $119,601 $ (39,689) $261,042 $ 2,601 $ (63) $ (18,038) $ 5,131 $ (10,378) $ — $250,664



(Note 2)

2020 2021 2021 Cash flows from operating activities

Profit (loss) before income taxes ¥ (3,165) ¥ 2,271 $ 20,513 Depreciation and amortization 3,292 2,237 20,206 Loss on impairment of fixed assets 2,953 130 1,174 Increase (decrease) in accrued bonuses (44) 134 1,210 Increase (decrease) in accrued directors’ and officers' retirement benefits (41) 13 117 Increase (decrease) in accrued directors' and officers' share awards — 14 126 Increase (decrease) in asset and liability for retirement benefits (62) 30 271 Interest and dividend income (105) (71) (641) Interest expense 109 108 976 (Gain) loss on sales of fixed assets (53) (20) (181) (Gain) loss on valuation of investment securities 23 112 1,012 (Gain) loss on sales of golf memberships (23) — — Loss on disposal of fixed assets 72 79 714 Loss on liquidation of subsidiaries and affiliates — 22 199 (Increase) decrease in notes and accounts receivable, trade 1,622 367 3,315 (Increase) decrease in inventories 1,394 103 930 Increase (decrease) in notes and accounts payable, trade 533 (838) (7,569) (Increase) decrease in accounts receivable, non-trade 109 7 63 Increase (decrease) in accounts payable, non-trade 271 340 3,071 Other (80) (141) (1,274)

Subtotal 6,806 4,903 44,287 Interest and dividends received 106 77 696 Interest paid (102) (114) (1,030) Income taxes paid (464) (212) (1,915)

Net cash provided by (used in) operating activities 6,345 4,653 42,029 Cash flows from investing activities

Payments into time deposits (228) (75) (677) Proceeds from time deposits 258 98 885 Purchases of fixed assets (2,637) (2,334) (21,082) Proceeds from sales of fixed assets 250 52 470 Purchases of intangible fixed assets (40) (26) (235) Proceeds from sale of intangible fixed assets 0 — — Purchases of investment securities (159) (63) (569) Proceeds from sales of investment securities — 0 0 Proceeds from redemption of investment securities 29 — — Payments for execution of loans (30) (9) (81) Collection of loans receivable 32 31 280

Net cash provided by (used in) investing activities (2,525) (2,325) (21,001) Cash flows from financing activities

Increase (decrease) in short-term loans payable (5,692) (1,950) (17,614) Proceeds from long-term debt 4,000 1,400 12,646 Payments of long-term debt (2,015) (3,055) (27,595) Purchases of treasury stock (127) (1) (9) Proceeds from sales of treasury stock 12 — — Dividends paid (325) (259) (2,339) Other (29) (37) (334)

Net cash provided by (used in) financing activities (4,176) (3,904) (35,263) Effect of exchange rate changes on cash and cash equivalents 17 (94) (849) Increase (decrease) in cash and cash equivalents (338) (1,671) (15,093) Cash and cash equivalents at beginning of the year 10,776 10,437 94,273 Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation — (24) (217) Cash and cash equivalents at end of the year ¥ 10,437 ¥ 8,742 $ 78,963


Consolidated Statement of Cash Flows

Note 1. Summary of significant accounting policies( a ) Basis of presenting financial statements The accompanying consolidated financial statements of SMK Corporation (the “Company”) and consolidated subsidiaries

are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan. For the purpose of this document, certain reclassifications have been made in the accompanying consolidated financial statements to facilitate understanding by readers outside Japan. In addition, certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current year’s presentation.

( b ) Basis of consolidation and investments in affiliated companies The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which

substantial control is exercised either through majority ownership of voting stock and/or by other means. All significant intercompany balances and transactions have been eliminated in consolidation. Certain foreign subsidiaries’ fiscal period ends on December 31, which differs from the year-end date of the Company;

however, the financial statements of these companies were tentatively closed as of March 31 and necessary adjustments for consolidation were made.

Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are accounted for by the equity method. Consolidated profit attributable to owners of parent includes the Company’s equity in the current profit attributable to owners of parent or loss of such companies, after the elimination of unrealized intercompany profits.

All assets and liabilities of the Company’s subsidiaries are revalued at the acquisition, if applicable, and the excess of cost over the underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line basis if such excess is material, or charged to income when incurred if immaterial.

( c ) Scope of consolidation Number of consolidated subsidiaries: 25 SMK-LOGOMOTION filed a petition for bankruptcy during the year ended March 31, 2021, which was excluded from scope

of consolidation. SMK Eletronica Brasil Ltda and SMK-LINK Electronics Corporation were liquidated during the year ended March 31, 2021, which were excluded from the scope of consolidation, respectively.

( d ) Application of equity method of accounting Number of affiliated companies accounted for using the equity method: 1( e ) Translation of foreign currencies Receivables and payables denominated in foreign currencies are translated into yen at the appropriate closing rate at the

end of the reporting period, and differences arising from the translation are included in the consolidated statement of income.

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at the appropriate closing rate at the end of the reporting period. Revenue and expense accounts are translated at the average rates of exchange prevailing during the year. Differences arising from the translation are presented as foreign currency translation adjustments in the consolidated financial statements.

( f ) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term

investments with a maturity of three months or less when purchased which can easily be converted to cash and are subject to little risk of change in value.

( g ) Inventories Inventories are mainly stated at the lower of cost or market. The following inventories are measured principally by their

respective methods: Finished products: Retail cost method Work in process: Actual raw material cost, determined by the most recent purchase cost method, plus direct labor costs

and manufacturing overheads Raw materials and supplies: Most recent purchase cost method Consolidated subsidiaries adopt mainly the moving average method.( h ) Securities Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding gain or

loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving average method.

( i ) Derivatives Derivatives are stated at fair value.( j ) Property, plant and equipment and depreciation (except for leased assets, Right of use assets) Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated principally by

the declining-balance method for the Company and its domestic subsidiaries, and by the straight-line method mainly for foreign subsidiaries. Certain buildings of the Company and its domestic subsidiaries acquired on or after April 1, 1998 and facilities attached to buildings and other non-building structures acquired on or after April 1, 2016 are depreciated by the straight-line method.

The estimated useful lives of the assets are as follows: Buildings: 10 to 50 years Machinery and vehicles: 4 to 10 years Tooling and office furniture: 2 to 6 years The residual values of the property, plant and equipment acquired on or before March 31, 2007 are depreciated equally

over a period of 5 years starting from the year following the year in which they have been depreciated up to their depreciable limit or 5% of the acquisition cost.

SMK Corporation and Consolidated SubsidiariesNotes to Consolidated Financial Statements


( k ) Intangible assets (except for leased assets) Amortization of intangible assets is calculated by the straight-line method. Software for own use is amortized based on the

utilizable period (5 years). Goodwill is amortized by the straight-line method mainly over 5 years.( l ) Leased assets Noncancellable lease transaction that transfer substantially all risks and rewards associated with the ownership of assets

are accounted for as finance leases. Depreciation of leased assets is calculated by the straight-line method based on the lease life as the useful life and the residual value is zero.

( m ) Right of use assets Depreciation of right of use assets is calculated by the straight-line method based on the lease term as the useful life and

the residual value is zero.( n ) Allowance for doubtful accounts The allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the

collectability of receivables from companies in financial difficulty.( o ) Accrued bonus Accrued bonuses are provided on the estimate of the amounts to be paid in the future by the Company, domestic

consolidated subsidiaries and certain overseas subsidiaries based on an accrual basis at the balance sheet date.( p ) Accrued directors’ and officers’ bonuses Accrued directors’ and officers’ bonuses are provided on the estimate of the amounts to be paid subsequent to the balance

sheet date.( q ) Accrued directors’ and officers’ retirement benefits Accrued directors’ and officers’ retirement benefits have been provided at an amount equal to 100% of the amount which

would be required to be paid based on the Company’s bylaws if all directors and officers resigned from the Company on the balance sheet date.

( r ) Accrued board benefit trust Accrued board benefit trust have been provided at an amount equal to 100% of the amount which would be required to be

paid based on the Company’s bylaws if all directors and officers exercised board benefit trust on the balance sheet date.( s ) Retirement benefits Asset and liability for retirement benefits for employees are recorded mainly at the amount calculated based on the

retirement benefit obligation and the fair value of the pension plan assets as of balance sheet date. The retirement benefit obligation for employees is attributed to each period by the benefit formula method over the

estimated years of service of the eligible employees. Actuarial gain or loss is amortized in the year following the year in which the gain or loss is recognized primarily by the straight-line method over a period of 5 years, which is within the estimated average remaining years of service of employees.

( t ) Hedge accounting( 1 ) Method of hedge accounting Deferral hedge accounting is applied for interest rate swap transactions. The exceptional treatment is applied for interest rate swap transactions meeting certain conditions.( 2 ) Hedging instruments and hedged items Hedging instruments: interest rate swaps Hedged items: long-term debt subject to interest rate fluctuation risk.( 3 ) Hedging policy The Company uses interest rate swaps to hedge risks from interest rate fluctuations on borrowings, only when

approved by the management.( 4 ) Assessment of effectiveness of hedging activities The Company evaluates the hedge effectiveness by comparing accumulated fluctuations of the hedging instrument and

hedged item every quarter. When the exceptional treatment is applied for interest rate swaps, the assessment of hedge effectiveness is omitted.

( u ) Income taxes Deferred income taxes are recognized based on the differences between financial reporting and the tax bases of the assets

and liabilities and are calculated using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.

( v ) Per share information Basic net income per share is computed based on the net income available for distribution to shareholders of common

stock and weighted-average number of shares of common stock outstanding during the year. Diluted profit attributable to owners of parent per share is computed based on the profit attributable to owners of parent available for distribution to shareholders and average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares of common stock to be issued upon the conversion of convertible bonds.

Net assets per share is computed based on the net assets available for distribution to shareholders of common stock and the number of shares of common stock outstanding at the balance sheet date. Cash dividends per share shown for each period in the consolidated statement of income represent the dividends applicable to the respective period.

( w ) Consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Nondeductible

consumption taxes are expensed in the consolidated financial statements.( x ) Consolidated taxation system The Company and its consolidated subsidiaries apply consolidated taxation system.( y ) Adoption of tax effect accounting for the transition from the consolidated taxation system to the group tax sharing system For items that have transitioned to the group tax sharing system and those for which the non-consolidated tax payment

system have been reviewed in line with the transition to the group tax sharing system, established under the ” Act for Partial Revision of the Income Tax Act and Other Acts” (Act No. 8 of 2020), the Company adopts the treatment set forth in Paragraph 3 of the “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (ASBJ Practical Issues Task Force No. 39, March 31, 2020) not to apply provisions of Paragraph 44 of the “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28, February 16, 2018). The amounts of deferred tax assets and deferred tax liabilities are, therefore, based on provisions of the tax code prior to the revision.

( z ) Significant accounting estimates1. Impairment of fixed assets ( 1 ) Amount recorded in the consolidated financial statements for the year ended March 31, 2021 Property, plant and equipment: ¥15,403 million ($139,129 thousand) (of which, SMK Electronics (Phils.) Corporation:

¥383 million ($3,459 thousand)) Impairment loss: ¥130 million ($1,174 thousand) (of which, SMK Electronics (Phils.) Corporation: ¥― million

($― thousand)) ( 2 ) Other information that facilitates users’ understanding of financial statements

( i ) Calculation method Assets or asset groups that have an indication of impairment are tested for impairment, and when it is

determined that an impairment loss should be recognized, the book value is reduced to the recoverable amount and an impairment loss is recorded. The recoverable amount is measured at value in use or net realizable value. Value in use is calculated by discounting future net cash flows estimated based on the future business plan to the present value.

( ii ) Key assumptions The key assumptions used in estimating future cash flows are forecasts of sales volume and sales prices, which

serve the basis of the business plan. The forecast of sales volume is calculated based on the estimated future order documents prepared by the customers. The impact of COVID-19 has been calculated assuming a main scenario in which vaccination will expand and the disease will gradually subside.

( iii ) Effect on the consolidated financial statements for the next fiscal year ending March 31, 2022 The estimation of projected sales volume, which is one of the key assumptions, is highly uncertain. If the

projected sales volume decreases significantly in the future due to the timing as to when the COVID-19 pandemic will subside and the impact that the pandemic will have on the economic environment, or due to changes in the market trend, impairment losses may be incurred in the year ending March 31, 2022.

2. Recoverability of deferred tax assets ( 1 ) Amount recorded in the consolidated financial statements for the year ended March 31, 2021 Deferred tax assets, net: ¥92 million ($831 thousand) Note: The amount before offsetting with deferred tax liabilities is ¥392 million ($3,541 thousand). ( 2 ) Other information that facilitates users’ understanding of financial statements

( i ) Calculation method The recoverability of deferred tax assets for deductible temporary differences and operating loss carryforwards

for tax purposes is determined by estimating taxable income based on future profitability. Estimates of taxable income derived from future profitability are based on future business plans.

( ii ) Key assumptions The key assumptions used in estimating taxable income are forecasts of sales volume and sales prices, which

serve the basis of the business plan. The forecast of sales volume is calculated based on the estimated future order documents prepared by the customers. The impact of COVID-19 has been calculated assuming a main scenario in which vaccination will expand and the disease will gradually subside.

( iii ) Effect on the consolidated financial statements for the next fiscal year ending March 31, 2022 The estimation of projected sales volume, which is one of the key assumptions, is highly uncertain. If the

projected sales volume decreases significantly in the future due to the timing as to when the COVID-19 pandemic will subside and the impact that the pandemic will have on the economic environment, or due to changes in the market trend, changes in estimates of taxable income may result in the reversal of deferred tax assets.

(aa) Accounting standards issued but not yet effective Accounting Standards and Implementation Guidance on Revenue Recognition The Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Revenue Recognition” (ASBJ Statement

No.29, March 31, 2020) and “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.30, March 26, 2021).( 1 ) Overview This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes

the following five-step model that will apply to revenue from customers: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when(or as) the entity satisfies a performance obligation( 2 ) Schedule date of adoption The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal

year ending March 31, 2022.( 3 ) Impact of the adoption of accounting standard and implementation guidance The Company is currently evaluating the effect of the adoption of this accounting standard and implementation

guidance on its consolidated financial statements. Accounting Standard for Fair Value Measurement and Related Implementation Guidance The Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Fair Value Measurement” (ASBJ

Statement No. 30), and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No.31), along with related updates to “Accounting Standard for Financial Instruments” (ASBJ Statement No.10), and“Implementation Guidance on Disclosures about Fair Value of Financial Instruments.” (ASBJ Guidance No. 19).


Note 6. Retirement benefits plansThe Company and certain of its domestic consolidated subsidiaries have either funded or unfunded defined benefit pension plans and defined contribution benefit pension plans.The Company has funded corporate pension fund plans and defined contribution pension plans. As a defined benefit pension plan, the Company has adopted a cash balance plan. Under the cash balance plan, the plan sponsor contributes money into a plan participant’s account based on the points according to the employee’s years of service and job performance and the points are calculated with an interest credit that reflects changes in market interest rates.Certain subsidiaries have funded and unfunded lump-sum payment plans and defined contribution pension plans. The simplified method is applied for the calculation of liability for retirement benefits and retirement benefit expense of certain domestic subsidiaries.

The changes in the retirement benefit obligation during the years ended March 31, 2020 and 2021 were as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Balance at the beginning of the year ¥ 6,530 ¥ 5,877 $ 53,085

Service cost 280 262 2,367Interest cost 42 38 343Actuarial gain and loss (218) 48 434 Retirement benefit paid (756) (589) (5,320)Other (1) 5 45

Balance at the end of the year ¥ 5,877 ¥ 5,644 $ 50,980

Short-term loans payable and long-term debt as of March 31, 2020 and 2021 consisted of the following:Short-term loans payable Millions of yen Thousands of U.S. dollars

2020 2021 2021Average interest rate on short-term loans payable, principally from banks, is 0.48%Secured ¥ 2,000 ¥ 900 $ 8,129 Unsecured 4,551 3,554 32,102 Total ¥ 6,551 ¥ 4,454 $ 40,231 Long-term debt Millions of yen Thousands of U.S. dollars

2020 2021 2021Average interest rate on long-term debt, principally from banks, is 1.01%Secured ¥ 3,223 ¥ 2,832 $ 25,580 Unsecured 5,378 4,016 36,275 Less: portion due within one year (3,088) (1,667) (15,057)Total ¥ 5,513 ¥ 5,180 $ 46,789

The assets pledged as collateral for short-term and long-term debt as of March 31, 2020 and 2021 were summarized as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021(1) Factory foundation

Buildings ¥ 1,107 ¥ 1,066 $ 9,629 Machinery and vehicles 60 51 461 Tooling and office furniture 110 90 813 Land 256 256 2,312 Total ¥ 1,535 ¥ 1,465 $ 13,233

(2) OtherBuildings ¥ 228 ¥ 212 $ 1,915 Tooling and office furniture 1 1 9 Land 39 39 352 Total ¥ 269 ¥ 252 $ 2,276

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2021 were summarized as follows:Year ending March 31, Millions of yen Thousands of U.S. dollars

2022 ¥ 1,667 $ 15,057 2023 　 2,246 20,287 2024 2,934 26,502 2025 　 — —2026 and thereafter — —Total ¥ 6,848 $ 61,855

Note 5. Short-term loans payable and long-term debt

Note 2. U.S. dollar amountsThe U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S. $1.00 = ¥110.71, the approximate rate of exchange at March 31, 2021. The translation should not be construed as a representation that the Japanese yen amounts actually represent, have been or could be converted into U.S. dollars at that or any other rate.

Inventories as of March 31, 2020 and 2021 consisted of the following:Millions of yen Thousands of U.S. dollars

2020 2021 2021Finished products ¥ 2,385 ¥ 2,721 $ 24,578 Work in process 810 707 6,386 Raw materials and supplies 3,230 3,118 28,164 Total ¥ 6,426 ¥ 6,547 $ 59,136

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2020 and 2021 were as follows:

Millions of yen Thousands of U.S. dollars2020 2021 2021

Cost of sales ¥ 523 ¥ 370 $ 3,342

Note 3. Inventories

Reduction entries due to acceptance of prefectural government’s grants relating to property, plant and equipment as of March 31, 2020 and 2021 were as follows:


Land ¥ 101 ¥ 101 $ 912

Note 4. Reduction entries( 1 ) Overview The ASBJ has developed an “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on

Accounting Standard for Fair Value Measurement” (hereinafter collectively, the “Fair Value Measurement Standard” ), which provide guidance for fair value measurement in order to improve comparability with internationally recognized accounting standards. The Fair Value Measurement Standard is applied with respect to the fair value of the following items;

• Financial instruments defined in “Accounting Standard for Financial Instruments” “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised requiring

disclosure of financial instruments broken down by level in the fair value hierarchy.( 2 ) Scheduled date of adoption The Company expects to adopt the accounting standards and related implementation guidance from the beginning of the

fiscal year ending March 31, 2022.( 3 ) Impact of adoption of revised accounting standard and related implementation guidance The Company is currently evaluating the effect of the adoption of the accounting standards and related implementation

guidance on its consolidated financial statements.(ab) Change in presentation (Changes due to the application of Accounting Standard for Disclosure of Accounting Estimates) The company adopted “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No.31, March 31, 2020)

and disclosed “Significant accounting estimates” for the year ended March 31, 2021. The company omitted the note for the year ended March 31, 2020 according to the transitional treatment set forth in

Paragraph 11 of the above accounting standard. (Consolidated Balance Sheet) Electronically recorded monetary claims previously presented as “notes and accounts receivable, trade” in current assets have

been reclassified to “electronically recorded monetary claims” for the year ended March 31, 2021 because of its increased quantitative materiality.

As a result, ¥12,332 million ($111,390 thousand) of “notes and accounts receivable, trade” in current assets previously presented in consolidated balance sheet for the year ended March 31, 2020 have been reclassified to ¥1,432 million ($12,934 thousand) of “electronically recorded monetary claims” and ¥10,899 million ($98,446 thousand) of “notes and accounts receivable, trade” in consolidated balance sheet as of March 31, 2021.

(ac) Additional information Introduction of Board Benefit Trust We introduced a new share-based compensation plan, a “Board Benefit Trust (BBT)” (the “Plan” ) for directors (including

executive officer, excluding outside directors; “Directors” ) based on the resolution at the 96th General Meeting of Shareholders on June 22, 2018 for the purpose of raising awareness of contributing to the improvement of medium- to long-term business results.

Regarding the accounting treatment for the plan, the gross method is adopted based on the “Practical Solution on Transactions of Delivering the Company’ s Own Stock to Employees, etc. through Trusts” (ASBJ Practical Issue Task Force No.30, March 26, 2015).( 1 ) Outline of the Plan The Plan is a share-based compensation plan under which our shares are acquired through a trust (the trust established in

accordance with the Plan, the “Trust”) by using the funds contributed by the Company. Directors will receive the Company’s shares through the Trust in accordance with the officer stock benefit rules prescribed by the Company. In principle, Directors will receive benefits, such as the Company’s shares, on their retirement.

( 2 ) The Company’s shares remaining in the Trust The Company’s shares remaining in the Board Benefit Trust (BBT) are recorded by the Company as treasury stock under

net assets at their book value in the BBT (excluding the amount of ancillary expenses). As of March 31, 2021, the book value of the said treasury stock was ¥160 million ($1,445 thousand), and the number of shares was 43,800.


Note 7. Net assetsInformation regarding changes in net assets for the years ended March 31, 2020 and 2021 was as follows:1. Shares issued and outstanding / Treasury stock

2020 2021

Types of shares

Number of shares at April

1, 2019 Increase Decrease

Number of shares at March

31, 2020

Number of shares at April

1, 2020 Increase Decrease

Number of shares at March

31, 2021Shares issued:

Common stock 7,500,000 — — 7,500,000 7,500,000 — — 7,500,000 Treasury stock:

Common stock 1,019,483 48,026 4,600 1,062,909 1,062,909 1,127 — 1,064,036

The Company’s shares remaining in the Board Benefit Trust (BBT) are included in treasury stock (43,800 shares at March 31, 2020 and 2021).

Number of shares1. Details of the increase of treasury stock are as follows: 2020 2021

Increase due to purchase of shares 46,800 —Increase due to purchase of shares of less than standard unit 573 573Increase in shares held by affiliates accounted for by the equity method 653 554

2. Details of the decrease of treasury stock are as follows:Decrease due to sales of shares held by subsidiaries 4,600 —

2. Dividends(1) Dividends paid

2020

Resolution Type of sharesTotal dividends(Millions of yen)

Dividends per share(Yen) Cut-off date Effective date

Shareholders’ meeting on June 25, 2019

Common stock 326 50 March 31, 2019 June 26, 2019

2021 2021

Resolution Type of sharesTotal dividends(Millions of yen)


Total dividends(Thousands of U.S. dollars)

Dividends per share(U.S.dollars)


Common stock 259 40 March 31, 2020 June 24, 2020 2,339 0.36

(2) Dividends with the cut-off date in the year ended March 31, 2020 and the effective date in the year ending March 31, 20212020

Resolution Type of shares Source of dividendsTotal dividends(Millions of yen)



Common stock

Retained earnings 259 40 March 31, 2020 June 24, 2020

Dividends with the cut-off date in the year ended March 31, 2021 and the effective date in the year ending March 31, 20222021 2021

Resolution Type of shares Source of dividendsTotal dividends(Millions of yen)


Total dividends(Thousands of U.S. dollars)

Dividends per share(U.S.dollars)


Common stock

Retained earnings 324 50 March 31, 2021 June 24, 2021 2,927 0.45

Dividends of the Company’s shares remaining in the Board Benefit Trust (BBT) ¥2 million ($18 thousand) are included in total dividends based on the resolution at shareholders’ meeting on June 23, 2021.

Note 8. Research and development costsResearch and development costs included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2020 and 2021 amounted to ¥2,845 million and ¥2,515 million ($22,717 thousand), respectively.

Note 9. Selling, general and administrative expensesMajor elements of selling, general and administrative expenses for the years ended March 31, 2020 and 2021 were as follows:


Salaries and wages of employees ¥ 3,833 ¥ 3,601 $ 32,526 Provision for bonus 261 308 2,782 Provision for directors’ and officers’ bonus 0 28 253 Retirement benefit cost 81 131 1,183 Provision for directors’ and officers’ retirement benefits 0 25 226 Provision for directors’ and officers’ share awards — 14 126 Provision for doubtful accounts (2) 2 18

The changes in plan assets during the years ended March 31, 2020 and 2021 were as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Balance at the beginning of the year ¥ 7,696 ¥ 6,929 $ 62,587

Expected return on plan assets 138 126 1,138Actuarial gain and loss (341) 945 8,536 Contributions by the Company 183 220 1,987Retirement benefits paid (747) (580) (5,239)

Balance at the end of the year ¥ 6,929 ¥ 7,641 $ 69,018

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2020 and 2021 were as follows:


Funded retirement benefit obligation ¥ 5,855 ¥ 5,623 $ 50,790 Plan assets at fair value (6,929) (7,641) (69,018)

(1,074) (2,017) (18,219)Unfunded retirement benefit obligation 22 20 181 Net liability for retirement benefits in the balance sheet (1,051) (1,996) (18,029)

Liability for retirement benefits 62 61 551 Asset for retirement benefits (1,114) (2,058) (18,589)Net liability for retirement benefits in the balance sheet ¥ (1,051) ¥ (1,996) $ (18,029)

The components of retirement benefit expense for the years ended March 31, 2020 and 2021 were as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Service cost ¥ 283 ¥ 259 $ 2,339 Interest cost 42 38 343 Expected return on plan assets (138) (126) (1,138)Amortization of actuarial gain and loss (63) 93 840 Retirement benefit expense ¥ 124 ¥ 265 $ 2,394

The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax effect) for the years ended March 31, 2020 and 2021 were as follows:


Actuarial gain and loss ¥ (188) ¥ 990 $ 8,942

The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income (before tax effect) as of March 31, 2020 and 2021 were as follows:


Unrecognized actuarial gain and loss ¥ (179) ¥ 811 $ 7,325

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2020 and 2021 were as follows:

2020 2021Bonds 4.1% 7.1%Stocks 34.6 34.2 Life insurances 38.5 33.4 Funds 9.8 9.4 Other 13.0 15.9 Total 100.0% 100.0%

1. The total plan assets include retirement benefit trusts which constitute 10.5% for the year ended March 31, 2020 and 14.5% for the year ended March 31, 2021.

2. The expected rates of return on plan assets has been estimated based on the anticipated allocation of plan assets to each asset category and the expected long-term returns on plan assets held in each category.

The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years ended March 31, 2020 and 2021 amounted to ¥86 million and ¥92 million ($830 thousand), respectively.

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as of March 31, 2020 and 2021 were as follows:

2020 2021Discount rate 0.6% 0.6%Re-evaluation rate 0.71% 0.58%Expected rates of return on plan assets 2.0% 2.0%


Note 12. Income taxesIncome taxes applicable to the Company and its domestic subsidiaries comprised corporation, inhabitants’ and enterprise taxes which, in the aggregate, resulted in statutory tax rates of approximately 30.5% for the year ended March 31, 2021.A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2021 was as follows. For the year ended March 31, 2020, note is omitted because it became loss before income taxes.

2020 2021Statutory tax rate —% 30.5%Items such as entertainment expenses permanently non-deductible for tax purposes — 1.3 Items such as dividend income permanently non-taxable — (6.6)Change in valuation allowance — (4.0)Tax credit for R&D expenses — (3.7)Foreign withholding taxes — 1.6 Inhabitant tax on per capita basis — 0.9 Statutory tax rate differences in subsidiaries — (9.0)Elimination of dividend income — 8.0 Accumulated surplus of subsidiaries — 0.4 Other — (2.2)Effective tax rate —% 17.2%

Note 11. Loss on impairment of fixed assetsAn impairment loss is recognized when the carrying amount of an asset exceeds undiscounted future net cash flows which are expected to be generated by such asset. The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its recoverable amount being the higher of the discounted future net cash flows or net realizable value.For the year ended March 31, 2020, impairment losses were recognized for the following assets.

Millions of yen2020

Asset group Location Use Buildings

Machinery and

vehicles

Tooling and office furniture

Construction in

progressIntangible

assets Total

CS Division Japan Connector/Jack production facilities ¥ 8 ¥ 995 ¥ 194 ¥ — ¥ — ¥ 1,197

SCI Division Japan Touch panel production facilities 0 0 1 — — 2

Research & Development Center Japan Wireless module

production facilities — 38 1 — 0 40

SMK Manufacturing, Inc. U.S.A. Remote controls/Unit

production facilities 0 17 9 1 0 30

SMK Electronica S.A. de C.V. Mexico Remote controls/Unit

production facilities 0 2 0 1 2 6

SMK Electronics (Dongguan) Co., Ltd. China

Connector/Jack production facilitiesSwitch/Remote controls/Unit production facilities

— 904 173 — — 1,077

SMK Electronics (Phils.) Corporation Philippines

Touch panel/Remote controls production facilities

174 422 — — — 597

SMK-LOGOMOTION Corporation Japan Others — — 0 — — 0

Total ¥ 183 ¥ 2,380 ¥ 382 ¥ 3 ¥ 2 ¥ 2,953

For the year ended March 31, 2021, impairment losses were recognized for the following assets.Millions of yen

2021

Asset group Location Use Land Buildings

Machinery and

vehicles


Leased assets

Right of use

assetsIntangible

assets TotalResearch & Development Center Japan Wireless module

production facilities ¥ — ¥ — ¥ — ¥ 2 ¥ — ¥ — ¥ — ¥ 2

Other parts business Japan Other parts production facilities — — — 0 — — — 0

SMK Electronics (Europe) Ltd. Ireland Business assets — 0 0 0 — 13 0 15

SMK Hungary Kft. Hungary Assets to be sold 15 44 2 2 — — — 64 SMK Electronics Technology Development (Shenzhen) Co.,Ltd.

China Business assets — 2 — 3 — — 5 11

Showa Enterprize, Haibara Japan Real estate for rent 27 0 4 0 1 — — 34

Total ¥ 42 ¥ 48 ¥ 7 ¥ 10 ¥ 1 ¥ 13 ¥ 5 ¥ 130

Thousands of U.S. dollars2021

Asset group Location Use Land Buildings

Machinery and

vehicles


Leased assets

Right of use

assetsIntangible

assets TotalResearch & Development Center Japan Wireless module

production facilities $ — $ — $ — $ 18 $ — $ — $ — $ 18

Other parts business Japan Other parts production facilities — — — 0 — — — 0

SMK Electronics (Europe) Ltd. Ireland Business assets — 0 0 0 — 117 0 135

SMK Hungary Kft. Hungary Assets to be sold 135 397 18 18 — — — 578 SMK Electronics Technology Development (Shenzhen) Co.,Ltd.

China Business assets — 18 — 27 — — 45 99

Showa Enterprize, Haibara Japan Real estate for rent 244 0 36 0 9 — — 307

Total $ 379 $ 434 $ 63 $ 90 $ 9 $ 117 $ 45 $ 1,174

The Company’s assets for business operations are categorized into groups on a division-by-division basis and the Company’s rental property and idle property on an individual property basis, whereas consolidated subsidiaries’ assets for business operations are categorized into groups on a subsidiary-by-subsidiary basis and their rental property and idle property on an individual property basis. Of the above asset groups, Research & Development Center, Other parts business, SMK Electronics (Europe) Ltd. and SMK Electronics Technology Development (Shenzhen) Co., Ltd. suffered declining trends in net sales and income due to intense price competition in the market. The future cash flows from their asset groups were estimated and it was found that they could not generate sufficient profitability to recover the carrying value of the asset groups, and therefore their book value was reduced to the recoverable amounts. As for SMK Hungary Kft., because its assets are to be sold for the year ended March 31, 2022, its book value was reduced to the recoverable amount. As for Showa Enterprize, Haibara, because it suffered declining trends in rent income, its book value was reduced to the recoverable amount.The recoverable amount of the asset group of the Research & Development Center, Other parts business, SMK Electronics (Europe) Ltd. and SMK Electronics Technology Development (Shenzhen) Co., Ltd. were measured at value in use, and since no future cash flows are expected, the full amount of the book value of the fixed assets regarding this business is recorded as impairment loss. The recoverable amount of the asset group of SMK Hungary Kft. was measured at net realizable value, which was calculated by deducting the estimated disposal cost from the future selling price. The recoverable amount of the asset group of Showa Enterprize, Haibara was measured at net realizable value, which was calculated based on valuations by external independent real estate appraisers.

Note 10. Gains and losses of fixed assetsThe components of gains and losses of fixed assets for the years ended March 31, 2020 and 2021 were as follows:Gains on sales of fixed assets


Buildings ¥ 9 ¥ — $ —Machinery and vehicles 28 14 126 Tooling and office furniture 10 7 63 Land 41 — —Total ¥ 90 ¥ 21 $ 190

Loss on sales of fixed assetsMillions of yen Thousands of U.S. dollars

2020 2021 2021Buildings ¥ 17 ¥ — $ —Machinery and vehicles 18 — —Tooling and office furniture 1 0 0 Total ¥ 36 ¥ 0 $ 0

Loss on disposal of fixed assetsMillions of yen Thousands of U.S. dollars

2020 2021 2021Buildings ¥ 7 ¥ — $ —Machinery and vehicles 52 60 542 Tooling and office furniture 12 19 172 Intangible asset 0 — —Total ¥ 72 ¥ 79 $ 714


Note 14. Amounts per share1. In the calculation of net assets and profit (loss) per share, the Company’s shares remaining in the Board Benefit Trust (BBT),

which are recorded as treasury stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of the number of shares as of March 31, 2020 and 2021 and the average number of shares for the year ended March 31, 2020 and 2021. In the calculation of total net assets per share, the said treasury stock deducted as of March 31, 2020 and 2021 is 43,800 and 43,800, respectively. In the calculation of profit (loss) per share, the said treasury stock deducted for the year ended March 31, 2020 and 2021 is 43,800 and 43,800, respectively.

2. Profit (loss) attributable to owners of parent per share of common stock is based on the following information:Millions of yen Thousands of U.S. dollars

2020 2021 2021Basic Profit (loss) attributable to owners of parent per share:

Profit (loss) attributable to owners of parent ¥(2,651) ¥1,917 $17,316 Profit (loss) attributable to owners of parent not attributable to common stockholders — — —

Profit (loss) attributable to owners of parent attributable to common stock (2,651) 1,917 17,316

Thousands of shares2020 2021

Average number of shares of common stock outstanding during the year 6,452 6,436

Note 15. Financial instruments( 1 ) Policy for financial instruments The Company and consolidated subsidiaries manage temporary cash surpluses through low-risk financial assets. The Company and consolidated subsidiaries raise funds through bank borrowings. The Company and consolidated subsidiaries use derivatives for the purpose of reducing risk and do not enter into derivatives

for speculative or trading purposes.

The significant components of deferred tax assets and liabilities at March 31, 2020 and 2021 were as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Deferred tax assets:

Inventory write-down ¥ 358 ¥ 93 $ 840 Accrued bonuses 180 202 1,825 Intercompany profit on inventory 52 45 406 Liability for retirement benefits 8 7 63 Allowance for doubtful accounts 38 858 7,750 Impairment loss 1,248 736 6,648 Operating loss carryforwards for tax purposes 1,790 1,186 10,713 Other 529 825 7,452

Total gross deferred tax assets 4,207 3,955 35,724 Valuation allowance for net operating loss carryforwards (1,782) (1,140) (10,297) Valuation allowance for deductible temporary differences (1,937) (2,422) (21,877)

Total valuation allowance (3,720) (3,563) (32,183) Total deferred tax assets 487 392 3,541

Deferred tax liabilities:Asset for retirement benefits (340) (628) (5,672) Deferred gain on land (36) (36) (325) Advanced depreciation on buildings (6) (5) (45) Reserve for special depreciation (8) (4) (36) Net unrealized gains on other securities (37) (114) (1,030) Accumulated surplus of foreign subsidiaries (107) (116) (1,048) Valuation difference on subsidiaries (309) (308) (2,782) Other (32) (38) (343) Deferred tax liabilities (878) (1,254) (11,327)

Net deferred tax assets ¥ (391) ¥ (861) $ (7,777)

1. Valuation allowance has decreased by ¥156 million ($1,409 thousand). This decrease is due to the additional recognition of valuation allowance for allowance for doubtful accounts in SMK Corporation ¥818 million ($7,388 thousand) with the exclusion of SMK-LOGOMOTION from scope of consolidation due to the filing of petition for bankruptcy, and due to the reversal of valuation allowance for net operating loss carryforwards in SMK-LOGOMOTION ¥590 million ($5,329 thousand), valuation allowance for inventory write-down in SMK-LOGOMOTION ¥270 million ($2,438 thousand) and valuation allowance for impairment loss in SMK-LOGOMOTION ¥264 million ($2,384 thousand).

2. A breakdown of net operating loss carryforwards and valuation allowance by expiry date as of March 31, 2020 and 2021 is as follows:

Millions of yen

2020

Due inone yearor less

Due afterone yearthrough

two years

Due aftertwo yearsthrough

three years

Due afterthree years

throughfour years

Due afterfour yearsthrough

five yearsDue afterfive years Total

Net operating loss carryforwards (a) ¥ 8 ¥ 13 ¥ 1 ¥ 4 ¥ 189 ¥ 1,573 ¥ 1,790 Valuation allowance (8) (13) (1) (4) (189) (1,566) (1,782) Deferred tax assets ¥ — ¥ — ¥ — ¥ — ¥ — ¥ 7 ¥ 7

Millions of yen

2021



two years


three years


throughfour years



Net operating loss carryforwards (a) ¥ 14 ¥ 1 ¥ 4 ¥ 149 ¥ 31 ¥ 983 ¥ 1,186 Valuation allowance (14) (1) (4) (149) (31) (938) (1,140) Deferred tax assets ¥ — ¥ — ¥ — ¥ — ¥ — ¥ 45 ¥ 45

Thousands of U.S. dollars

2021



two years


three years


throughfour years



Net operating loss carryforwards (a) $ 126 $ 9 $ 36 $ 1,346 $ 280 $ 8,879 $ 10,713 Valuation allowance (126) (9) (36) (1,346) (280) (8,473) (10,297)Deferred tax assets $ — $ — $ — $ — $ — $ 406 $ 406

(a) The amount is determined by multiplying the corresponding net operating loss carryforwards by the effective statutory tax rate.

Note 13. Other comprehensive incomeThe following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2020 and 2021.

Millions of Yen Thousands of U.S. dollars2020 2021 2021

Net unrealized gains (losses) on other securities:Amount arising during the year ¥ (275) ¥ 259 $ 2,339 Reclassification adjustments for gains and losses included in profit attributable to owners of parent 2 (0) (0)

Amount before tax effect (272) 259 2,339 Tax effect 81 (77) (696) Net unrealized gains (losses) on other securities (191) 181 1,635

Net unrealized gains (losses) from hedging instruments:Amount arising during the year (18) (7) (63) Reclassification adjustments for gains and losses included in profit attributable to owners of parent 7 18 163

Amount before tax effect (10) 10 90 Tax effect — — — Net unrealized gains (losses) from hedging instruments (10) 10 90

Foreign currency translation adjustments:Amount arising during the year (272) 325 2,936 Reclassification adjustments for gains and losses included in profit attributable to owners of parent — (22) (199)

Amount before tax effect (272) 302 2,728 Tax effect 3 (4) (36) Foreign currency translation adjustments (268) 297 2,683

Retirement benefits asset and liability adjustments:Amount arising during the year (124) 896 8,093 Reclassification adjustments for gains and losses included in profit attributable to owners of parent (63) 93 840

Amount before tax effect (188) 990 8,942 Tax effect 55 (300) (2,710) Retirement benefits asset and liability adjustments (132) 690 6,232

Total other comprehensive income ¥ (603) ¥ 1,180 $ 10,658


Note 16. SecuritiesInformation regarding securities classified as other securities at March 31, 2020 and 2021 was summarized as follows:


Book value Acquisition

Unrealized gain (loss)





Securities whose book value exceeds their acquisition

Stocks ¥ 1,288 ¥ 960 ¥ 327 ¥ 1,896 ¥ 1,498 ¥ 398 $ 17,126 $ 13,531 $ 3,595 Subtotal 1,288 960 327 1,896 1,498 398 17,126 13,531 3,595 Securities whose acquisition exceeds their book value

Stocks 363 546 (182) 7 8 (1) 63 72 (9)Subtotal 363 546 (182) 7 8 (1) 63 72 (9)Total ¥ 1,651 ¥ 1,506 ¥ 144 ¥ 1,904 ¥ 1,506 ¥ 397 $ 17,198 $ 13,603 $ 3,586

Unlisted stocks of ¥532 million at March 31, 2020 and ¥853 million ($7,704 thousand) at March 31, 2021 are not included in the above table because there were no quoted market prices available and the fair value is extremely difficult to determine.

Investment securities in unconsolidated subsidiaries and affiliates are as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Investment securities ¥ 308 ¥ 355 $ 3,207

Information regarding sales of securities classified as other securities for the years ended March 31, 2020 and 2021 was as follows:


Proceeds from sales of securities ¥ — ¥ 0 $ 0 Stocks — 0 0

Gains on sales — 0 0 Stocks — 0 0

Losses on sales — 0 0 Stocks — 0 0

Impairment of investment securities classified as other securities for the years ended March 31, 2020 and 2021 were as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Stocks ¥ 23 ¥ 112 $ 1,012

Note 17. DerivativesAs a matter of policy, the Company does not speculate in derivative transactions. The Company does not anticipate nonperformance by any of the counterparties to the derivative transactions, all of whom are leading domestic financial institutions with high bond ratings.In accordance with the Company’s policy, the accounting department controls derivative transactions and requires approval by the director responsible for accounting and the representative directors of the Company. The director who has the responsibility to control the performance and the related risks connected with derivatives reports these to the Management Committee of the Company.The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional method of hedge accounting is used to account for those transactions.(Currency related) Millions of yen Thousands of U.S. dollars

Contract amount Fair value Unrealized gain (loss)Contract amount Fair value


Forward foreign exchange contracts: 2020 2021 2020 2021 2020 2021 2021 2021 2021

Sell: US$ / Buy: Yen ¥ 744 ¥ 722 ¥ (1) ¥ (39) ¥ (1) ¥ (39) $ 6,522 $ (352) $ (352)Sell: US$ / Buy: EUR 59 — (0) — (0) — — — — Sell: US$ / Buy: GBP 30 — (0) — (0) — — — — Total ¥ 834 ¥ 722 ¥ (1) ¥ (39) ¥ (1) ¥ (39) $ 6,522 $ (352) $ (352)

( 1 ) Calculation of fair value The fair value is calculated by the price offered by financial institution.( 2 ) Derivative transactions to which hedge accounting was applied are excluded from the above table.(Interest related) Millions of yen Thousands of U.S. dollars

Contract amount Due after one year Fair valueContract amount

Due after one year Fair value

2020 2021 2020 2021 2020 2021 2021 2021 2021Interest rate swaps(Deferral hedge accounting) ¥ 5,004 ¥ 3,072 ¥ 3,072 ¥ 1,940 ¥ (18) ¥ (7) $ 27,748 $ 17,523 $ (63)

Interest rate swaps(Exceptional treatment) ¥ 600 ¥ — ¥ — ¥ — ¥ — ¥ — $ — $ — $ —

( 1 ) Calculation of fair value The fair value is calculated by the price offered by financial institution.( 2 ) Regarding interest rate swaps to which the exceptional treatment applied, they are accounted for as if they were an integral

part of the hedged long-term debt, and their fair value is included in the fair value of long-term debt in Note 15.

( 2 ) Types of financial instruments and related risk Trade receivables – trade notes and accounts receivable, electronically recorded monetary claims – are exposed to credit risk

in relation to customers. Regarding this risk, the credit management is executed periodically. Marketable securities and investment securities are exposed to market risk. The fair value of those securities is reported in a

board meeting periodically. Substantially all trade payables – trade notes and accounts payable – have payment due dates within one year. Short-term loans payable are raised mainly in connection with business activities, and the repayment dates of long-term debt

extend up to five years from the balance sheet date. Long-term debt with variable interest rates is exposed to interest rate fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Company and consolidated subsidiaries utilizes interest rate swap transactions as a hedging instrument. Information regarding the method of hedge accounting, hedging instruments and hedged items, hedging policy, and the assessment of effectiveness of hedging activities is found in Note 1 (t).

Execution and management of derivatives transactions are carried out in accordance with the company rules specifying the transaction authority. In addition, in order to alleviate credit risk, derivative transactions are only dealt with banks with high credit ratings. Although operating liabilities and loans payable are exposed to liquidity risk, the Group’s companies are able to manage it by using methods such as preparing monthly cash management plans.

( 3 ) Additional information regarding fair value of financial instruments Fair value of financial instruments includes the value based on the market price. In addition, if such information is absent,

reasonable assessments of their value are included. Furthermore, the contract amounts, etc. relating to derivatives transactions are described in Note 17. Derivatives themselves do not serve as indicators of market risk involved in derivatives transactions.

Information regarding fair value of financial instruments at March 31, 2020 and 2021 was summarized as follows:Millions of yen Thousands of U.S. dollars

2020 2021 2021Book value Fair value Difference Book value Fair value Difference Book value Fair value Difference

Cash and cash equivalents ¥ 10,437 ¥ 10,437 ¥ — ¥ 8,742 ¥ 8,742 ¥ — $ 78,963 $ 78,963 $ —Time deposits 77 77 — 57 57 — 515 515 —Notes and accounts receivable, trade 10,899 10,899 — 11,242 11,242 — 101,545 101,545 —Electronically recorded monetary claims 1,432 1,432 — 1,325 1,325 — 11,968 11,968 —Investment securities 1,651 1,651 — 1,904 1,904 — 17,198 17,198 —Notes and accounts payable, trade 5,101 5,101 — 5,029 5,029 — 45,425 45,425 —Short-term loans payable 6,551 6,551 — 4,454 4,454 — 40,231 40,231 —Accounts payable, non-trade 1,468 1,468 — 1,775 1,775 — 16,033 16,033 —Long-term debt 8,601 8,569 (32) 6,848 6,776 (71) 61,855 61,205 (641)Derivatives (21) (21) — (47) (47) — (425) (425) —

Long-term debt includes current portion of long-term debt recorded as short-term loans payable in the consolidated balance sheets.The assets and liabilities arising from derivatives are shown on a net basis with the amount in parentheses representing a net liability position.1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative

transactions Cash and cash equivalents, time deposits, notes and accounts receivable, trade and electronically recorded monetary claims Since these items are settled in a short period of time, their carrying value approximates fair value. Investment securities The fair value of stocks is based on quoted market prices. Short-term loans payable, notes and accounts payable, trade and accounts payable, non-trade Since these items are settled in a short period of time, their carrying value approximates fair value. Long-term debt The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest

rate to be applied if similar new loans were entered into. Derivatives Please refer to Note 17. Derivatives of the notes to the consolidated financial statements.

2. Financial instruments whose fair value is extremely difficult to determineMillions of yen Thousands of U.S. dollars

2020 2021 2021Unlisted securities ¥ 841 ¥ 1,209 $ 10,920

Unlisted securities are not included in the investment securities because there were no quoted market prices available and the fair value is extremely difficult to determine.

3. The schedules for redemption of monetary assets and securities with maturitiesMillions of yen Thousands of U.S. dollars

2020 2021 2021


Due after one year through

five years

Due after five years through

ten years



five years


ten years



five years


ten yearsCash equivalents and time deposits ¥ 10,506 ¥ — ¥ — ¥ 8,790 ¥ — ¥ — $ 79,397 $ — $ —Notes and accounts receivable, trade 10,899 — — 11,242 — — 101,545 — —

Electronically recorded monetary claims 1,432 — — 1,325 — — 11,968

Total ¥ 22,839 ¥ — ¥ — ¥ 21,358 ¥ — ¥ — $ 192,918 $ — $ —


Thousands of U.S. dollarsReporting Segments

2021CS

DivisionSCI

Division

Research & Development

Center Subtotal Other Total Adjustment ConsolidatedNet sales

Outside customers $ 179,207 $ 256,806 $ 2,276 $ 438,298 $ 325 $ 438,623 $ ― $ 438,623 Intersegment sales ― ― ― ― ― ― ― ― Total 179,207 256,806 2,276 438,298 325 438,623 ― 438,623

Operating income (loss) 13,043 (650) (2,502) 9,882 (217) 9,665 ― 9,665 Identifiable assets 103,523 141,460 2,493 247,493 62,072 309,566 145,055 454,629 Others

Depreciation 9,918 8,554 54 18,526 1,680 20,206 ― 20,206 Increase in fixed assets and intangible fixed assets 14,217 5,826 36 20,098 271 20,378 ― 20,378

Other is business segments not included in the reportable segments. It includes other parts, leasing, property rental and worker dispatch businesses.Adjustment includes corporate assets which are not allocable to the reportable segments.

2. Geographical information( 1 ) Net sales

Millions of yen2020 Japan Asia North America Europe Consolidated China Other U.S.A. OtherNet sales ¥ 15,688 ¥ 10,699 ¥ 5,605 ¥ 19,002 ¥ 857 ¥ 2,307 ¥ 54,161

Millions of yen2021 Japan Asia North America Europe ConsolidatedChina Other U.S.A. OtherNet sales ¥ 13,657 ¥ 10,501 ¥ 5,591 ¥ 16,941 ¥ 660 ¥ 1,208 ¥ 48,560

Thousands of U.S. dollars2021 Japan Asia North America Europe ConsolidatedChina Other U.S.A. OtherNet sales $ 123,358 $ 94,851 $ 50,501 $ 153,021 $ 5,962 $ 10,911 $ 438,623

( 2 ) Fixed assetsMillions of yen

2020 Japan Asia North America Europe ConsolidatedChina Other

Fixed assets ¥ 11,366 ¥ 2,875 ¥ 862 ¥ 6 ¥ 281 ¥ 15,392 Millions of yen


Fixed assets ¥ 11,412 ¥ 2,998 ¥ 735 ¥ 54 ¥ 202 ¥ 15,403 Thousands of U.S. dollars


Fixed assets $ 103,080 $ 27,080 $ 6,639 $ 488 $ 1,825 $ 139,129

3. Information about major customers Sales amount and ratio of the major customers which account for 10% or more of net sales is as follows:

Millions of yen Thousands of U.S.dollarsMajor Customer Related Segment 2020 2021 2021

Company A CS Division SCI Division ¥ 6,337 ¥ — $ —

(1) Company name is not disclosed because there is a confidentiality clause in the contract with Company A.(2) For the year ended March 31, 2021, note is omitted because sales amount of Company A is less than 10% of net sales.

4. Information about the loss on impairment of fixed assetsMillions of yen Thousands of U.S.dollars

2020 2021 2021CS Division ¥ 1,512 ¥ 8 $ 72SCI Division 1,399 18 163 Research & Development Center 40 2 18 Subtotal 2,952 30 235 Other 0 35 316 Adjustments and eliminations — 64 578 Consolidated ¥ 2,953 ¥ 130 $ 1,174

5. Information about the amortization of goodwill and the balance of goodwill For the years ended March 31, 2020 and 2021, there was no amortization and balance of goodwill.

Note 19. Segment information(Overview)The reporting segments of the Company and consolidated subsidiaries are designed as business segments whose segregated financial information can be obtained and to which the management reviews to decide on the allocation of managerial and financial resources and to evaluate their financial performance.The Company and consolidated subsidiaries are primarily engaged in the three divisions as follows;CS (Connection System) Division: The division produces and sells connectors and jacks.SCI (Sensing, Communications and Interface) Division: The division produces and sells remote controls, switches, camera modules and touch sensor.Research & Development Center: The center produces and sells wireless module.

The business segment information is prepared in a manner similar to the accounting treatment as described in Note 1. Segment performance is evaluated based on operating income or loss.

1. Business segment informationMillions of yen

Reporting Segments

2020CS

DivisionSCI

Division



Outside customers ¥ 18,670 ¥ 35,137 ¥ 281 ¥ 54,088 ¥ 73 ¥ 54,161 ¥ — ¥ 54,161 Intersegment sales — — — — — — — — Total 18,670 35,137 281 54,088 73 54,161 — 54,161

Operating income (loss) 141 10 (279) (127) (117) (244) — (244) Identifiable assets 9,791 16,856 247 26,895 7,272 34,168 16,036 50,204 Others

Depreciation 1,704 1,387 23 3,115 176 3,292 — 3,292 Increase in fixed assets and intangible fixed assets 1,633 722 1 2,357 639 2,996 — 2,996

Millions of yenReporting Segments

2021CS

DivisionSCI

Division



Outside customers ¥ 19,840 ¥ 28,431 ¥ 252 ¥ 48,524 ¥ 36 ¥ 48,560 ¥ — ¥ 48,560 Intersegment sales — — — — — — — — Total 19,840 28,431 252 48,524 36 48,560 — 48,560

Operating income (loss) 1,444 (72) (277) 1,094 (24) 1,070 — 1,070 Identifiable assets 11,461 15,661 276 27,400 6,872 34,272 16,059 50,332 Others

Depreciation 1,098 947 6 2,051 186 2,237 — 2,237 Increase in fixed assets and intangible fixed assets 1,574 645 4 2,225 30 2,256 — 2,256

Note 18. Investment and rental propertyThe profit of investment and rental property for the year ended March 31, 2020 amounted to ¥491 million, the gain on sales of fixed assets amounted to ¥50 million and the loss on sales of fixed assets amounted to ¥17 million.The profit of investment and rental property for the year ended March 31, 2021 amounted to ¥498 million ($4,498 thousand) and the loss on impairment of fixed assets amounted to ¥28 million ($253 thousand).Information on the fair value of investment and rental property at March 31, 2020 and 2021 was summarized as follows:


Book valuebeginning of the year Net change

Book valueend of the

year

Fair valueend of the

year



year


year



year


year¥ 6,402 ¥ 534 ¥ 6,936 ¥ 14,305 ¥ 6,936 ¥ (154) ¥ 6,782 ¥ 14,741 $ 62,650 $ (1,391) $ 61,259 $ 133,150

1. The fair value represents the acquisition cost less accumulated depreciation.2. The components of net change in book value for the year ended March 31, 2020 included increases mainly due to acquisitions

in the amount of ¥578 million and reclassifications from assets for business operation ¥147 million, and decrease mainly due to sales and disposal of fixed assets ¥50 million and depreciation ¥142 million. The components of net change in book value for the year ended March 31, 2021 included increases mainly due to acquisitions in the amount of ¥22 million ($198 thousand), and decrease mainly due to depreciation ¥148 million ($1,336 thousand) and impairment of fixed assets ¥28 million ($253 thousand).

3. The fair value is mainly based upon the amount appraised by outside independent real estate appraisers.


SMK Corporation and Consolidated SubsidiariesReport of Independent AuditorsNote 20. Related party transactions

Significant transactions with related parties for the years ended March 31, 2020 and 2021 were as follows:Millions of yen

2020 Transactions Balances

RentOther

investments

Other current assets

Terutaka Ikeda (Supreme corporate adviser) ¥ 14 ¥ 14 ¥ 1 Millions of yen

Transactions BalancesCollection of

loan receivable

Interest income


Long-term loans

receivablePaul Evans (Director) ¥ 1 ¥ 1 ¥ 1 ¥ 29

Millions of yen2021 Transactions Balances

RentOther

investments


Terutaka Ikeda (Supreme corporate adviser) ¥ 14 ¥ 14 ¥ 1 Millions of yen

Transactions BalancesCollection of

loan receivable

Interest income


Long-term loans

receivablePaul Evans (Director) ¥ 1 ¥ 0 ¥ 1 ¥ 28

Thousands of U.S. dollars2021 Transactions Balances

RentOther

investments


Terutaka Ikeda (Supreme corporate adviser) $ 126 $ 126 $ 9 Thousands of U.S. dollars

Transactions BalancesCollection

of loan receivable

Interest income


Long-term loans

receivablePaul Evans (Director) $ 9 $ 0 $ 9 $ 253

1. Business transactions with related parties are carried out on an arm’s-length basis similar to third party transactions.2. Terutaka Ikeda is the parent of President and CEO / COO Yasumitsu Ikeda.

Note 21. Subsequent EventsThere were no subsequent events for the year ended March 31, 2021.

Independent Auditor’s Report

The Board of DirectorsSMK Corporation

OpinionWe have audited the accompanying consolidated financial statements of SMK Corporation and its consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as at March 31, 2021, and the consolidated statements of income, comprehensive income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated financial statements.In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

Basis for OpinionWe conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.


Impairment of Property, Plant and Equipment of SMK Electronics (Phils.) Corporation

Description of Key Audit Matter Auditor’s Response

On March 31, 2021, property, plant and equipment are valued at ¥15,403 million ($139,129 thousand) in the consolidated balance sheet, which represented 31% of total assets.As described in the Note (Significant Accounting Estimates), the Company determined that there was an indication of impairment for the asset group related to property, plant and equipment of ¥383 million ($3,459 thousand) of SMK Electronics (Phils.) Corporation during the year ended March 31, 2021 due to the decline in profitability as a result of changes in the business environment. However, the Company did not recognize an impairment loss as the undiscounted estimated future cash flows generated from the asset group exceeded the carrying amount.The estimated future cash flows generated from the continued use of an asset group are determined based on the business plan approved by the Board of Directors and forecasts of sales volume and sales prices for the periods subsequent to the period covered by the business plan.As described in Note (Significant Accounting Estimates 1.), the significant assumptions in estimating future cash flows include forecasts of sales volume and sales prices which serve as the basis of the business plan.Given that the significant assumptions used to estimate the future cash flows are subject to uncertainty and require management’s judgement, we determined impairment of property, plant and equipment to be a key audit matter.

The audit procedures we performed to assess the estimated amount of undiscounted future cash flows used in determining the necessity of recognition for impairment loss on property, plant and equipment of SMK Electronics (Phils.) Corporation include the following, among others:• We compared the cash flows projection period

with the remaining economic lives of the major assets.

• We evaluated consistency with the estimated future cash flows and the business plan approved by the Board of Directors.

• Regarding the business plan for the second and subsequent terms that reflects future uncertainty, we considered the management’s assessment of future uncertainty.

• In order to evaluate the effectiveness of management’s estimation process in formulating business plan, we compared business plans in previous years to actual results.

• With respect to the forecasts of sales volume and sales prices which is the significant assumptions serve as the basis of the business plan, we discussed with the management and obtained the estimated future order documents and the purchase orders prepared by the customers to evaluate consistency with the business plan.

Recoverability of Deferred Tax Assets

Description of Key Audit Matter Auditor’s Response

As described in Note (Income taxes), the Company offset deferred tax assets of ¥392 million ($3,541 thousand), which were determined to be recoverable, with deferred tax liabilities, and recorded deferred tax assets of ¥92 million ($831 thousand) and deferred tax liabilities of ¥954 million ($8,617 thousand) in the consolidated financial statements as of March 31, 2021. Of this amount, deferred tax assets determined to be recoverable at SMK Corporation amounted to ¥264 million ($2,385 thousand).The Company determines the recoverability of deferred tax assets for future deductible temporary differences and operating loss carryforwards for tax purposes by estimating taxable income based on its estimated future profitability.Estimate of taxable income based on its estimated future profitability is calculated based on the future business plan and the significant assumptions including forecasts of sales volume and sales prices. The Company discloses the significant assumptions in Note (Significant Accounting Estimates 2.).Given that the significant assumptions applied in the future business plan involve uncertainties and require management’s judgement in assessing the recoverability of deferred tax assets, we determined it to be a key audit matter.

The audit procedures we performed to assess the recoverability of deferred tax assets included the following, among others:• We examined the amount of deductible

temporary differences and tax loss carryforwards by involving our tax professionals, and we also examined the schedule of the years in which they were expected to be reversed or expired.

• We assessed the underlying business plan to evaluate the estimate of future taxable income. We assessed the future business plan, by evaluating its consistency with the business plan approved by the Board of Directors.

• In order to evaluate the effectiveness of management’s estimation process in formulating business plan, we compared business plans in previous years to actual results.

• With respect to the forecasts of sales volume and sales prices which is the significant assumptions serve as the basis of the business plan, we discussed with the management and obtained the estimated future order documents and the purchase orders prepared by the customers to evaluate consistency with the business plan.

Responsibilities of Management, the Corporate Auditor and the Board of Corporate Auditors for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern.The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial StatementsOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.


As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

• Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that we have complied with the ethical requirements regarding independence that are relevant to our audit of the financial statements in Japan, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.From the matters communicated with the Corporate Auditor and the Board of Corporate Auditors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Interest Required to Be Disclosed by the Certified Public Accountants Act of JapanOur firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Convenience TranslationThe U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2021 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to the consolidated financial statements.

Ernst & Young ShinNihon LLCTokyo, Japan

June 23, 2021

/s/ Daisuke IshidaDesignated Engagement PartnerCertified Public Accountant

/s/ Takeo SatoDesignated Engagement PartnerCertified Public Accountant

32 ANNUAL REPORT 2021

Officer Introduction (As of June 23, 2021)

Tetsuo HaraDirector and

Executive Vice President

Masanobu IkeoExecutive Vice President

Takemi IshibashiVice President

Kohei OhgakiExecutive Vice President,

Chief Financial Officer

Auditors

Mitsuyuki MasubuchiVice President

Hiroshi UsamiVice President,

Chief Information Officer

Atsushi ObinataVice President

Fumikazu HataVice President

Mikio OtsuboVice President

Mitsuhiko GotoVice President

Corporate Executive Officers

Toshio NakamuraDirector (Outside)

Yasumitsu IkedaPresident,

Chief Executive Officer and Chief Operating Officer

Kaoru IshikawaDirector (Outside)

Directors

Yoshiyuki KakuDirector and

Executive Deputy President, Chief Technology Officer

Paul EvansDirector and

Executive Vice President

Morikazu FukuiFull-Time Auditor

(Outside)

Naru NakashimaAuditor (Outside)

Fumio NishimuraAuditor (Outside)

SMK CORPORATION5-5, Togoshi 6-chome, Shinagawa-ku, Tokyo 142-8511, JAPANTel: +81-3-3785-1111 Fax: +81-3-3785-1068

Shares and ShareholdersCorporate Data

Name SMK Corporation

Established April 3, 1925

Registered January 15, 1929

Primary business Manufacture and sale ofvarious parts forelectro-communication deviceand electronic equipment

Capital ¥ 7,996,828,021

Stock exchange listing Tokyo Stock Exchange

Administrator of shareholders register

Mitsubishi UFJ Trust and Banking Corporation

Independent auditors Ernst & Young ShinNihon LLCTokyo, Japan

Employees (SMK-Group) 5,407

Global network（As of July 31, 2021）

Domestic bases（7 Bases）

Tokyo（Head office）, Toyama, Hitachi, Osaka, Nagoya, Ibaraki and Fukuoka

Overseas bases（15 Countries/Areas, 32 Bases）

Taiwan, Hong Kong, China, Singapore, Thailand, Malaysia, Philippines, Korea, Ireland, U.K., France, Germany, Belgium, U.S.A. and Mexico

Share ownership by shareholder type

Financial institutions 29.53%

Financial instruments dealers 0.77%

Other entities 12.96%

Foreign entities, etc. 6.02%

Individuals and others 50.72%

Authorized shares 19,596,127

Issued shares 7,500,000(including 1,052,489 shares of treasury stock)

Number of shareholders 6,204

Major shareholders (top ten) Shares owned (1,000 shares)

Percentage of shares (%)

SMK Cooperating Company Share Holding Association 413 6.42

The Master Trust Bank of Japan, Ltd. (Trust Account) 334 5.19

Nippon Life Insurance Company 324 5.03Mizuho Bank, Ltd. 322 5.00Dai Nippon Printing Co., Ltd. 320 4.96MUFG Bank, Ltd. 250 3.89SMK Employees Share Holding Association 213 3.31Mitsubishi UFJ Trust and Banking Corporation 180 2.79Custody Bank of Japan, Ltd. (Trust Account) 163 2.54The Showa Ikeda Memorial Foundation 150 2.33Note: The Company holds 1,052 thousand shares of treasury stock,

but is excluded from the above list. Figures for percentage of shares are calculated after subtracting the number of treasury stock. The number of treasury stock includes the 43 thousand shares of the Company held by the Officer Stock Benefit Trust.

＊ The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by SMK Corporation is under license.

＊ Other products and company names listed in this report are the registered trademarks or trademarks of their respective holders.

Please see our website for detailed IR information.The IR Information section of SMK’s website includes annual reports and presentation materials. The website also carries information about SMK’s products, corporate data and CSR/ESG initiatives.

Website https://www.smk.co.jp/

Corporate Information(As of March 31, 2021)

Head Office

Toyama Works Hitachi Works

Documents

ANNUAL EPT 2021